Negotiating Through Sports in HR Management

SMBA Negotiation

It’s often best to learn by doing, and that’s what the SMBA class experienced the past two days as we took the lessons of negotiation gleaned from a series of readings and lectures and put them into practice by negotiating issues such as collective bargaining agreements and collegiate athlete compensation.

During this portion of a Human Resources Management class that covered our Dominican Republic trip, we read the famous book Getting to Yes, which is focused on negotiating without giving in, as well as a textbook that taught us the difference between distributive and integrative bargaining. The former method utilizes threats and leverage to negotiate in a hard-line manner, often when feelings for future negotiations are not so important. Integrative negotiation focuses on expanding the pie so there is more to distribute and logrolling issues so that everybody wins on their priority issues. We also learned about setting a resistance point beyond which a negotiator will walk away and instead choose their BATNA (their Best Alternative To a Negotiated Agreement).

The class split up into eight teams and discussed the following four issues: the 2011 NBA CBA negotiation, the 2011 NFL CBA negotiation, the question of whether college athletes should be paid and a Dominican-themed question based off our trip in which the Dominican Republic government faced off against Major League Baseball to discuss improvements to the league’s DR operations.

The Dominican group asked MLB for 30 community centers to complement the academies each team has set up whereas MLB countered by questioning the value of such center. The sides also discussed the issue of youth steroid testing and fingerprinting at a young age to prevent identity falsification.

One of the central issues of the NFL negotiation surrounded the topic of depression and CTE found in former football players and what kind of future medical costs related to these issues the league should pay. They also debated the commissioner’s powers to handle disciplinary issues, and the amount of BRI both sides should receive was a sticking point as well.

Both of those debates featured much negotiation outside of class, but in the collegiate athletes compensation case the NCAA chose not to negotiate until class started. In the debate pictured above, the players’ side argued for the need for basketball and football players to be better able to support themselves with a modest stipend that would take up only 3 percent of NCAA revenues. The NCAA raised Title IX issues that caused the players to counter by splitting that money with female athletes as well.

The players’ side also considered creative options to get student-athletes additional benefits such as by allowing car companies that sponsor a university’s athletic teams to provide discounted or free automobiles for students, for example. The NCAA wondered if they would supply such offers for players beyond the top male athletes at the school. After about an hour of debate, this match ended in a stalemate with the NCAA unwilling to budge as would likely be the case in real life.

I did my best David Stern impersonation in negotiating on behalf of the NBA against the players’ association in a mock 2011 CBA negotiation. After two meetings in which my side tried a combination of distributive (threatening that a lockout would hurt the players more than the owners) and integrative techniques (trying to come up with creative solutions that could expand the pie and benefit both sides), we entered the negotiation this morning knowing full well that the Basketball Related Income section was most important to both sides. At the start of the lockout, the players earned 57 percent of BRI and in the actual NBA negotiation they finished with a 50-50 split.

We initially offered to go all the way to 60-40 in our favor, which the opposition rightly laughed at, and we soon brought it down to 55-45 and then 52.5-47.5 entering the negotiation. We  agreed that by asserting a $340 million a year loss (without considering creative accounting) on the part of the teams as a whole, we would need to receive 51.9 percent of BRI to break even and thus the players union offered that BRI number if we gave them everything else that they wanted.

In the end we invented a few creative exceptions, including a “Russell Westbrook Rule” in which a team can have a second mini-max contract for five years that counts against just 75 percent of the cap and a “Diminished Skills Clause” that is basically the current amnesty provision only the player gets just 75 percent of his salary upon being waived. We also agreed on a 50.9-49.1 split of BRI in favor of the owners. We reached that BRI number by trading off a number of the other issues we discussed, such as contract length and maximum annual increases. We also imposed a luxury tax similar to the one in today’s NBA.

By actually trying out different distributive and integrative tactics in this setting, we were able to put the lessons from ours readings to life in a sports setting we enjoyed.